The CEO Confidence Index, Chief Executive’s monthly gauge of CEOs’ expectations for business conditions over the next 12 months, dropped 2.1% in September to 5.70 out of a possible 10. This is the lowest the Index has reached since March, when CEOs provided an average rating of 5.55. The rating of current overall business conditions also fell in September, with an average rating of 5.48 out of a possible 10. This is a drop of 1.8% from August and is the lowest rating of current conditions since May.

In a trend that has remained consistent during the tepid economic recovery, larger companies are far more optimistic about an improvement in overall business conditions over the next 12 months, and they also rate current conditions significantly more highly than CEOs from smaller companies. This continues to indicate that smaller businesses are struggling to effectively modify their operations to suit the new economic realities. Larger companies, notorious for being less nimble and capable of change than smaller businesses, have actually done a far better job of reinventing their businesses to succeed in these uncertain times.

For companies with over $100 million in annual revenues, the average rating of expectations of future business conditions was 6.07–fully 6.5% higher than the overall rating. This number is 7.1% higher than the average rating from CEOs of business with between $10 and $100 million in annual revenue, and a staggering 13.2% higher than that given by CEOs of companies that generate less than $10 million annually.

Though the majority of the comments we received from all CEOs cited concerns with political and regulatory uncertainty due to a dysfunctional Congress and a President many believe does not have the best interest of business at heart, the effects of this uncertainty seem to be affecting smaller businesses in a much more impactful way. Based on the comments, it appears larger companies are still concerned, but they have been able to strategically plan for uncertainty and factor it into their business models. CEOs of smaller companies don’t necessarily have the same coffers to prepare for the unknown, and thus are more afraid of the uncertainty in the overall economy.

The smaller the business, the less confident they are. When comparing the smallest businesses in our survey (less than $10 million in revenue) to slightly larger businesses ($10 to $100 million), the smaller company CEOs rate current conditions 5.8% lower. Though uncertainty is perceived negatively by all CEOs, the smallest companies are seemingly being crippled by current conditions.

In terms of what these means for employment, 43.6% of all of the CEO respondents expect to increase the number of employees in their companies over the next 12 months, while 17.2% plan to reduce their headcount. For companies with less than $10 million in revenue, only 32.7% expect to increase their number of employees. Interestingly, 22.7% of the largest companies (greater than $100 million in revenue) expect to decrease their number of employees, which is the highest number among the three company size groupings.

One of the key metrics to track how confident businesses truly are is their anticipated capital expenditures over the next 12 months. This number gives us a sense of how much businesses are interested in investing in themselves for future growth. For the smallest companies, only 21.6% expect an increase in capital expenditures, compared to 51.9% for the largest companies.

As one would expect from this information, there are also vast differences in expectations for revenue and profitability by company size. Less than 43% of the smallest companies expect an increase in profits over the next year, whereas 69.3% of the largest companies expect profits to grow. Relatedly, 49.9% of the smallest businesses expect revenue growth, compared to 68.5% for the largest companies.

The CEO of a $20 million transportation company provided his perspective on business conditions: “We are basically seeing 100% of our clients cutting back on everything. They all indicate that between the general economy being lousy, concerns about another recession on the boards and constant negative government news, they are just waiting to see what happens next. The environment is the most negative we have seen, ever.”